GM06 Online Exam Assignment AIMA 2020

Subject Code: GM06

Subject Name: BUSINESS LAW & CORPORATE GOVERNANCE

Component name: TERM END  

Question 1:- Which of the following provision(s) in the Companies Act 2013, help improve Corporate Governance in a Company?      

1. a) The shareholders have a right to appoint the directors.
2. b) The shareholders have a right to appoint auditors to audit the accounts
3. c) Directors can be removed just by passing an ordinary resolution, even before their term expires.
4. d) All the three provisions listed under A, B, and C.

Question 2:- The expression `independent director` is explained as a non-executive director if certain conditions are satisfied. Which one of the following conditions will disqualify a person for appointment as Independent director?           

1. a) He has a material pecuniary relationships or transactions with the company or its promoters              
2. b) He has not been an executive of the company in the immediately preceding three financial years.
3. c) He is not related to promoters or persons occupying management positions at the board level or at one level below the board.
4. d) All the three conditions listed under A, B, and C.

Question 3:- Point out the correct statement relating to a contract for sale of Goods:          

1. a) The subject matter of the contract must necessarily be goods
2. b) A contract of sale may be absolute or conditional
3. c) Transfer or agreement to transfer the ownership of goods
4. d) All the three conditions listed under A, B, and C.

Question 4:- There was a sale of ‘foreign refined rape-oil’ warranted only equal to sample. The oil supplied was the same as the sample, but it was not ‘foreign refined rape-oil, being a mixture of it and other oil. Can the buyer refuse to accept the delivery?   

1. a) No, as it is only a breach of warranty
2. b) No, breach has taken place as the oil supplied is the same as the sample.
3. c) Yes there is a breach of conditions the oil supplied does not match the description.
4. d) None of the options is true

Question 5:- Which of the documents is NOT an example of a Negotiable Instrument.      

1. a) Postal Order
2. b) Cheque
3. c) Share Warrant
4. d) Bill of Exchange

Question 6:- Which of the statement /options is true, in relation to Negotiable Instruments?            

1. a) No person in India, other than RBI or the Central Government can make or issue a promissory note “payable to bearer”.
2. b) No person in India other than RBI or the Central Government can draw or accept a bill of exchange ‘payable to bearer on demand’.         
3. c) Both options under A and B are correct
4. d) None of the options is True

Question 7:- Which of the following is wrong statement in connection with a Custom to be valid as a `source` of law ?          

1. a) custom must be observed continuously for a very long time.
2. b) custom must be supported by public opinion
3. c) Custom must not conflict with any statute
4. d) Legislation cannot override an established custom.

Question 8:- A pays Rs. 10000 in consideration pf B`s promise to deliver his dog. The dog is dead at the time of the promise. Mark the correct statement as a consequence of given facts;

1. a) The agreement is valid but B must repay A the sum of Rs 10000 received by him from A
2. b) The Agreement is Void, but B must repay A the money received i.e. Rs 10000.
3. c) A is entitled to receive damages worth double the amount paid to B
4. d) There will be no follow up as the agreement is frustrated by death of the Dog

Question 9:- A invites B for dinner in a restaurant. B accepts the invitation. On the appointed , B goes to the restaurant; to his utter surprise A is not there. What legal remedy, if any is available to B against A?        

1. a) Enjoy his dinner and send the bill to A.
2. b) File a legal suit for damages to include the costs of travel, dry-cleaning charges for the jacket, and the cost paid to advocate for instituting the suit.
3. c) A shall have no legal remedy against B.
4. d) B shall have no legal remedy against A

Question 10:- A, by misrepresentation leads B to believe that 500 kg of Indigo are made annually at A`s Factory. B examines the account of the Factory which shows that only 400 kg of Indigo was made. After this B buys the Factory. Which of the following is the correct statement as per Contract Act?             

1. a) The contract is voidable on account of A`s misrepresentation
2. b) The contract is not voidable on account of A`s misrepresentation.
3. c) A will compensate B to the extent of profits on sale of 100 kg of Indigo for three years.
4. d) This contract for sale of Factory is not governed by Contract Act.

Question 11:- A lends a car to B for his own driving only. B allows C, his wife , to drive the car. C drives with care, but the car gets damaged in an accident. Will B be liable to pay for consequent repairs to the car?             

1. a) NO, it is gratuitous bailment, A will bear the expenses for repair.
2. b) YES, B is liable to pay for damages as he made an unauthorised use of the car.
3. c) Yes because car got damaged when it was bailed to B for his driving
4. d) NO, because B`s wife and A`s wife are good friends.

Question 12:- A buys goods of B and property in the goods has passed to him; but the goods remain in B`s warehouse and the price is unpaid. Before delivery, a fire burns down the warehouse destroying the goods. Who will bear the loss as per Sales of Goods Act?

1. a) Loss will be borne by B as the goods were in his possession.
2. b) Loss will be borne by A, as the property has passed to him, though price remains unpaid.
3. c) Loss will be borne by B, as A has not yet paid for the goods nor taken delivery thereof.
4. d) Loss will be shared between A and B as decided by Arbitrator

Question 13:- C advances to B, his tenant, Rs. 200000 on the guarantee of A. C has also a further security for the Rs 200000 by a mortgage of B`s furniture. C cancels mortgage. B becomes insolvent and C sues A on his guarantee. Decide.

1. a) A will be liable to C as he had given a guarantee for Loan advanced to B.                       
2. b) First C will take possession of Furniture of B, sell it, only the shortfall will be paid by A
3. c) A is discharged from liability to the extent of the value of security , unless he consented to release of such security
4. d) A is discharged from liability completely as his consent was not take before cancellation of mortgage on furniture

Question 14:- A gives authority to B to sell A`s land and to pay himself out of the proceeds , the debts due to him from A. B goes insane; can A revoke his authority?         

1. a) YES, Principal can revoke agency at his will.
2. b) NO, A cannot revoke this agency/authority, nor can it be terminated by his insanity or death.
3. c) Yes, because B has since gone insane.
4. d) NO, as consent from B is required to revoke the agency and he has gone insane

Question 15:- The celebrated case of Carlill Vs. Carbolic Smoke Ball is an example of:       

1. a) a minor cannot enter into a valid contract.
2. b) Contract is voidable at the option of the person whose consent has been obtained by undue influence
3. c) What is `a general Offer`
4. d) What is the difference between a specific offer and a general offer

Question 16:- A sold his business to B and agreed not to compete with him for a given number of years , within reasonable local limits. A, desirous of re-entering business , in violation of the contractual obligation, formed a private company with majority shareholdings. B filed a suit against A and his company for going ahead with the competing business. in violation of the Contract. Decide;           

1. a) B cannot file a case against the company thus formed, as company is a separate legal entity from A.
2. b) A is not liable for the actions taken by the Company as he is only a shareholder of the Company.
3. c) B should get the relief as A formed the company with majority shareholding to avoid own valid legal contractual obligation, not to enter competing business.
4. d) B should take over all shareholdings of A in the new company at a price to be decided by the Court

Question 17:- A Company has the power to borrow money , but the Articles of the Company provide that in case the directors borrow more than Rs. 5 Crore they require prior approval by the company in general meeting. The Directors issued debentures to the extent of Seven Crores without obtaining approval from shareholders. How can this issue which is ultra vires the powers of Directors but intra vires the powers of the Company be resolved?             

1. a) since the Directors exceeded their powers, money will be returned to debenture holders within a month.
2. b) The act which is intra-vires the powers of the company but ultra -vires the powers of the directors may be regularised by ratification in general meeting of the company.
3. c) There is no way to regularise the actions which are ultra-vires the powers of Directors.
4. d) Since the directors act on behalf of the Company, whatever the Company can do,, can be done by directors and there is no irregularity in actions of the directors.

Question 18:- In a Sale of vegetable glue, packed in casks, the buyer comes to examine them, but simply looks at the outside of the casks. The defect could have been discovered by examination. Later on delivery of the casks the buyer raises a plea that Implied Condition as to Merchantable quality subsists. Decide.            

1. a) Buyer is right in claiming that there is an implied condition that goods must be merchantable, and breach of this condition entitles him to return the goods
2. b) The defect which could have been discovered by examination is overlooked. The implied condition of merchantability is not applicable.
3. c) The buyer , can take the plea the he overlooked the examination as generally such casks contain glue which has no defects.
4. d) None of the options is True.     

Question 19:- Find the correct statement about liability of parents/ guardians in Contracts by minors:           

1. a) A minor`s parents/ guardians are not liable to his creditors for breach of a contract by him.
2. b) The minor`s parents/ guardians are not liable to creditors for the breach of contract by him whether the contract is for necessaries of life or not.
3. c) The parents/ guardians will be liable when the minor is acting as their agent.        
4. d) All statements/ options are True

Question 20:- Which of the following criteria must be satisfied so as to be known as `holder in due course` in case of a Negotiable Instrument?      

1. a) he must have obtained the instrument before maturity
2. b) the instrument is not incomplete or irregular and does not have any defect on the face of it
3. c) he must have taken the instrument in good faith and without notice of any defect in the title of the person from whom he derived his title.
4. d) All the three criteria listed in the options are to be satisfied.

Case Study

Conducting (Virtual) Annual Meetings in Light of COVID-19

With rising concerns around the spread of corona-virus globally, many public companies have already postponed their annual meetings over the course of last week, due to health concerns or partial lockdowns often prohibiting public gatherings. Numerous companies as Daimler, Deutsche Telekom and others have postponed their meetings, while others such as Schindler or Berkshire Hathaway will hold their meetings without the public and only with proxy representatives. Numerous other issuers on the Continent are considering adding a virtual component to the format of their annual shareholder meetings in order to mitigate health risks (“hybrid”) meetings. While the general meetings of the Spanish banks Santander or BBVA are set to go ahead, the banks are encouraging shareholders to participate remotely, to protect the wellbeing of the investors. HSBC in the UK has already warned its shareholders of the potential COVID-impact on its shareholder meeting, recommending to vote via proxy. Depending on the country, AGMs may be a needed precursor for operational items; some countries require shareholder approval to make dividend payments. Shareholder associations across different jurisdictions are asking governments for forbearances that will allow them to pay dividends even if a general meeting is postponed. Other jurisdictions, as France, Spain or Netherlands already allow for interim dividend payments. Postponing the Meeting It is clear that globally, issuers are putting in contingency plans in order to prepare for a potential delay of their meetings or to find hybrid solutions in order to fulfil legal requirements while mitigating risk. The most obvious of these is delaying the meeting date. Generally, in most jurisdictions AGM`s can be delayed up to 8 months (or 6 months for European SE`s), but the question on dividend-payments is often not resolved. Keeping in view the provisions of Companies Act 2013 and assuming normalcy has come back after COVID-19 has been beaten back.

Answer the following Questions related to Annual General Meeting of a Public limited Company with its Registered Office at New Delhi: 

Question 21:- Which of the statements about frequency of holding Annual General Meeting of the company is True?           

1. a) Every company, whether public or private, having share capital or not, limited or unlimited must hold Annual General meeting.
2. b) Annual general meeting must be held in each calendar year and not more than fifteen months shall elapse between meetings
3. c) Annual General Meeting must be held on a day which is not a public holiday,
4. d) Any business other than ordinary business transacted at the meeting will be deemed to be special business.

Question 22:- An Extra-ordinary General Meeting may be called by:        

1. a) By directors on their own accord
2. b) By directors on requisition
3. c) By requisitionists themselves
4. d) all options/ statements are True                     

Question 23:- Which of the options is true in relation to Quorum at a shareholders` Meeting?

1. a) Number of members sufficient to transact business at a meeting is Quorum.
2. b) Quorum for the meeting is generally fixed by Articles of the Company; Articles however cannot reduce the number given in the Act as minimum number to form a quorum.
3. c) Any resolution passed without the quorum is invalid
4. d) All the statements/ options are correct

Question 24:- Some resolutions require special notice. Examples of such resolutions are- appointing an auditor, a person other than a retiring auditor, removing a director before his term expires. Which of the options that follow are False in relation to Resolutions requiring special notice?        

1. a) under this, a notice of intention to move resolution should be given to the company not less than 21 days before the date of meeting at which it is proposed to be moved
2. b) under this, a notice of intention to move resolution should be given to the company not less than 14 days before the date of meeting at which it is proposed to be moved
3. c) The company in turn must immediately give notice by advertisement in a newspaper or in any other mode allowed by Articles, but not less than seven days , before the meeting
4. d) None of the options is false

Question 25:- Companies Act 2013, provides that every company shall include in the `directors report` a statement of its directors` responsibility statement which shall, among other things, indicate that :           

1. a) in preparation of the annual accounts , the applicable accounting standards had been followed;
2. b) the directors had taken proper and sufficient care for the maintenance of adequate accounting records so as to safeguard the company`s assets and to detect frauds and irregularities;             
3. c) the directors had prepared the annual accounts on a `going concern` basis.